Weighing the Options of Refinancing
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Some have said that only when your new interest will be at least two points lower, should you refinance your loan. That might have been valid years ago, but with the fact that refinancing has been costing less recently, it's a good time to consider a new loan! A refinance is often worth its cost many times over, because of the advantages that it brings, in addition to a reduced interest rate.
When you refinance, you might have the ability to lower the interest rate and monthly payment , sometimes by a lot. You could also be able to "cash out" a portion of your equity, which you may use to take care of higher interest debts, add on to your home, or take a vacation. With reduced rates, you might also be able to build your home equity faster by switching to a shorter-term mortgage.
Expenses and Fees
All of these advantages do cost something, though. When you refinance, you're paying for a lot of the same things you were charged for at the time you got your current mortgage. These may include settlement costs, appraisal fees, lender's title insurance, underwriting fees, and others.
Do the Math
You might need to pay discount points (prepaid interest) to get a lower rate of interest. The money you'll save over the life of the mortgage might be significant if you've paid up front about 3% of the new loan balance. You might have heard that points can be deducted on your income taxes, but because tax regulations can be ever-changing, we urge you to speak with a tax professional before depending on this.
Another expense that borrowers might consider is that a lower rate of interest will reduce the interest amount you'll be able to deduct on your federal income taxes. Call us at 562 320-0510 to help you do the math.
Most borrowers find that the monthly savings balance out the up-front expenses of refinancing. We can help you figure out your options, considering the effect a refinance could have on your taxes, if you are likely to sell your home in the next couple of years, and your available cash. Call us at 562 320-0510 to get you started.
Want to know more about refinancing your home? Call us: 562 320-0510.